implicit cost

(redirected from Indirect Expenses)
Also found in: Encyclopedia.

Implicit Cost

The opportunity cost of an activity. Implicit costs are what a company or individual could have earned had a different decision been made. For example, suppose an independent consultant has two clients and she spends some time working on the first client's project. The implicit costs are what the consultant would have made had she worked on the second client's project instead. Implicit costs contrast with explicit costs, which are what someone actually spends on an activity. It is also called an indirect cost.

implicit cost

or

imputed cost

the OPPORTUNITY COST to a FIRM of using resources owned by the firm itself to produce its output. For example, if a firm occupies a building that it owns, it forgoes the opportunity of renting it out for some other use. Thus, implicit costs represent the sacrifice of income that could have been earned by renting out (or selling) the firm's resources to others.

To achieve an accurate measure of the total cost of producing goods or services, the firm must impute a rent to itself using a SHADOW PRICE based upon the current market rates for renting the property See PROFIT, EXPLICIT COST.

implicit cost

or

imputed cost

the OPPORTUNITY COST to a FIRM of using resources owned by the firm itself to produce its output. For example, if a firm occupies a building that it owns, it foregoes the opportunity of renting it out for some other alternative use. Thus, implicit costs represent the sacrifice of income that could have been earned by renting out (or selling) the firm's resources to others.

To achieve an accurate measure of the total cost of producing goods or services, the firm must impute a rent to itself based upon the current market rate for renting the property See PROFIT, EXPLICIT COST, SHADOW PRICE.

References in periodicals archive ?
Total indirect expenses were down 17% for the period 9M/2015 compared to 9M/2014 mainly from not replacing staff who have resigned.
Moreover, blade server installation also reduces various indirect expenses such as facilities charges, cabling cost and others.
ABeam Consulting provides ABeam ICOS, a support tool for optimizing indirect expenses as a component of restructuring costs.
As the prices of the basic vegetables, pulses and the perishable groceries have gone up, we have cut back on eating out and some other indirect expenses such as Internet and travelling to manage the budget," he said.
The total indirect expenses caused by the amputees is more than SR 88 billion.
BALTIMORE--The 35,000 American suicides that occurred in 2007 as well as attempted suicides that year cost the United States a total of roughly $48 billion in direct and indirect expenses.
2 million, mainly on reduced cost of sales and lower indirect expenses.
It is generally referred to as a job cost accounting system, which is a subsidiary ledger where costs are accumulated by each cost objective with the appropriate allowable indirect expenses allocation.
Although the majority of absence is short term, the average cost to the employer, including direct and indirect expenses is currently a staggering pounds 800 per absent employee.
Indirect expenses exceeded budget by 31 percent as result of changes in the shared services with CalCPA and the accrual of other personnel expenses.
The company made progress in labor productivity and in absorbing indirect expenses, as well as in quality, which resulted in a reduction of warranty expense, he said.